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MONEY BOX LIVE
Presenter: VINCENT DUGGLEBY
TRANSMISSION 14th MARCH 2005 3.00-3.30pm
RADIO 4
DUGGLEBY: In a couple of days time Gordon Brown will
present his ninth budget, ahead of an election widely expected to be in
early May. Some people think it might be his last, but in any event he
enjoys an enviable reputation for his iron grip on economic policy Ė or,
put more bluntly, getting the numbers to add up. He can point to steady
growth, low inflation and low interest rates, but thereís no denying that
taxes in general have gone up, even if these have been offset, for
example, by extra allowances for couples with children. So on this
Money Box Live, we thought weíd look more closely at Mr Brownís
budget agenda, with the help of Evan Davis, the BBCís economics
editor; economist Roger Bootle, economic adviser to Deloitte; Hilary
Cook, director of investment strategy at Barclays stockbrokers; and
chartered accountant John Whiting from PricewaterhouseCoopers who,
among things, edits the book of modern budgets from 1945 to the
present day. What do you think of Mr Brownís record and what should
his priorities be for Wednesdayís budget? Maybe itís council tax or
stamp duty or the cost of fuel, higher pensions, a cut in inheritance tax or
a reduction in the amount of means testing for benefits. 08700 100 444
is the number. As Mr Brown rattles through his numbers, itís hard for
professionals to work out whether planned spending will be met by tax
receipts, economic growth and an acceptable level of borrowing, and
thatís where the background papers and budget report come into play
with an upbeat catchphrase such as last yearís ĎPrudence for a Purpose: a
Britain of Stability and Strength.í That was 2004 and immediate doubts
began to grow about whether Mr Brown had got his sums right. So letís
start with an e-mail from Tom in Guildford, who happens to be a health
service worker. And he says, ĎEvan, we seem to have two budgets
every year: one in the Autumn and one in the Spring. Are both really
necessary and which is the more important?í
DAVIS: Well itís a very good question. Well the idea
was we had one budget because budgets apply to a year. Thatís the
planning horizon in the UK. But then we have this need sometimes for
a second statement just to update people, perhaps preview some of the
measures coming up in the budget so we can discuss them and think
about them, and so we had Autumn statements which transmogrified into
the pre-budget report. Now, as it happens, the pre-budget report,
instead of being a discussion of what will come up in the next yearís
budget does end up looking more like a mini budget. But in principle
itís a sort of green paper version of the budget, which is a red book itís
called, and you know thereís no doubt that it is this weekís budget that is
the more important of the two.
DUGGLEBY: But, John, we must of course remember that
some of the allowances have already been set.
WHITING: Oh very much so, and I think thatís picking up
on what Evan says. The two events are beginning to look more and
more the same. Iíve always rather thought of it as the sort of interim
and final results of UK Plc. and this is the big one, but itís always useful
to hear more. And to be fair, what is happening is weíre also being
used more to consult on the tax system changes, so the pre-budget
report, to be fair, is often coming out with ideas that are being floated,
consulted on and then coming into the budget.
DUGGLEBY: Roger, we talk about two budgets, but of course
there is another thing and thatís the comprehensive spending reviews, so
actually itís almost three budgets.
BOOTLE: Yes, thatís right. I mean historically the
Autumn statement used to be mainly about government spending and the
budget mainly about tax. Now I thought that was a disaster because it
disassociated the two and pretended that they werenít in some way
connected, and now in fact youíve got this massive spending review in
July which again doesnít talk mainly about tax. I think thereís a lot to
be said for the idea of bunging it altogether.
DUGGLEBY: Hilary, does the city sort of take these things
with Ö Does it let it all roll off like water off a duckís back?
COOK: No Ė for the city, the more information, the
better; the less uncertainty, the better.
DUGGLEBY: Which is the most important for you?
COOK: Well theyíre both very important. What we
want to hear is his views on spending, his views on what economic
growthís going to be and where heís going to borrow the money, and
that can come in either of the two budgets.
DUGGLEBY: Okay, well letís pick this point up about the key
numbers. The ones that weíre seeing very strongly are the growth
targets. Evan, theyíve said that Gordon Brown has been a bit
optimistic. Is that correct Ė 3 to 3Ĺ? He seems as though heís going to
meet it, but just.
DAVIS: He looks a bit optimistic. Heís certainly more
optimistic than the average independent forecast. If you add all the
independent forecasters together and divide by the number youíve got of
them, then you find itís more like 2Ĺ to 2ĺ% growth. Gordon Brownís
relying on about 3% growth. Now it has to be said that Gordon Brown
has a rather better record at forecasting economic growth than everybody
else and he will undoubtedly crow about his fantastic record of
forecasting it and will undoubtedly say trust me guys, Iíve been right
before, Iíll be right again. And to some extent I think one just has to
credit him with that. Heís right and you know he can crow about it.
DUGGLEBY: Roger, the one number that seems to have come
right for him fairly lately is the revenue figures. Theyíre slightly better
than people were expecting.
BOOTLE: Yes, they are. I agree with Evan: I think heís
going to be absolutely unbearable about the growth. I think itís going to
be frightful.
DUGGLEBY: Well you got it wrong. I think you all got it
wrong.
BOOTLE: We all got it wrong, yes. But some day weíll
get it right. But in fact he hasnít been quite as good on the borrowing
numbers. Lately theyíve gone a bit his way, but you know what, heís
been arguing about it the last few years Ė the balance between so-called
current spending, day to day spending, and investment spending - and
heís argued that heís going to spend an awful lot more on investment
spending. Now whatís in fact happened is that the investment spending
hasnít happened on the scale that he set, so although the overall
borrowing numbers have come in reasonably okay, frankly the mix is
still pretty dreadful.
DUGGLEBY: Okay, Iím going to interrupt you to take Lionel
in Anglesey whoís asking us about, Lionel, government borrowing.
LIONEL: Yes, yes I am indeed. I never seem to get any
information at all about that. Iíd like to know from whom does the
Chancellor or the Government borrow. Does it borrow from Barclays
or Rothschilds or who? What is the rate of interest which we have to
pay?
DUGGLEBY: Alright, well letís just start off by saying who is
the Government borrowing from. Hilary Ö
COOK: A wide mixture of sources we have. You can
borrow from the public. We have premium bonds, for example. The
biggest source of course is the city and it wonít be Barclays itself, but a
lot of pension funds and institutions who will be very keen to buy
government debt. And we may well hear much more about this on
Wednesday because for the first time the Government is looking to
borrow money from institutions and a fifty year gilt is possibly going to
be launched. Thatís a very long dated gilt indeed and that is to match
the need for pension funds to Ö You know they want to match their
long-term liabilities with assets.
DUGGLEBY: The costs of borrowing though. We had an e-
mail about this asking how much the cost of borrowing has gone up or
down in the last few years, Roger. Have you got any statistics on this
one?
BOOTLE: Well by and large itís gone down and recently
governments have been borrowing Ė it differs of course from time to
time depending on which instrument they borrow on Ė but roughly
somewhere between 4 and 5%, unless theyíre borrowing index linked in
which case they borrow at around about 2%.
DUGGLEBY: Has it come down though?
BOOTLE: Yes.
DUGGLEBY: It has come down?
BOOTLE: Itís come down both because the volume of debt
as a proportion of our national income has come down under Gordon
Brown and the rates of interest have been in a rather low position over
the last few years. So heís benefited twice: firstly from the lower debt
and from the lower rates of interest.
DUGGLEBY: Okay. Now weíve got a call, I think, from
Simon in Orkney. Simon, your call Ö
SIMON: I canít understand why inflation is not a problem
when oil has steadily increased in price, as have other global
commodities like coal, steel and shipping.
DUGGLEBY: Well weíve got the author of a very, very well
known book here called ĎThe Death of Inflationí - one R. Bootle. So
this listener doesnít understand how you can possibly claim inflationís
dead when these things are happening.
BOOTLE: Well I think there are two parts to this question.
The first is, if you like, a narrow accounting question Ė how come that
inflation overall is pretty low when youíve got these things going up
very sharply? And the answer is that lots of other things are going
down in price and no one (myself included) who said that inflationís
dead or is going to be very low ever supposed that nothing would ever
go up in price again. And in fact over the last year, for instance,
clothing and footwear prices are down by around about 6%. But I think
the second part of the query is really about how can it be that despite
these big increases in oil prices inflation stays so low, and I think itís
really because of competitive forces around the world - globalisation
keeping prices down.
DUGGLEBY: On this question, John, so many tax rates are
ostensibly linked to inflation. Well I say so many. Some are and some
arenít; there doesnít seem to be a great deal of rationale. I mean, for
example, letís just get clear which are the ones that are actually
definitely linked to inflation? The allowances is one.
WHITING: The basic personal allowance is the classic link
to inflation, but then again you can say well inflation or inflation because
your basic personal allowance that you and I and everybody gets is
linked to, subject to Parliament deciding otherwise, general RPI type
inflation. But, on the other hand, ití s not linked to the growth in
earnings, so of course if we go further up the scale letís say where the
40% tax bracket comes in, that tends to drift up in line with RPI.
DUGGLEBY: And thatís something we will learn on
Wednesday. We donít know yet.
WHITING: We will. We definitely want to listen for on
Wednesday exactly where it goes up to Ė whether it actually helps
people significantly Ė because traditionally over the last few years itís
only gone up very modestly: dragged a greater proportion of income in,
therefore dragged more tax into the net, fiscal dragging action. And
then of course thereís allowances, some like inheritance tax allowances
for marriage gifts and things like that, that havenít gone up for a very
long time indeed.
DUGGLEBY: But weíre talking about what we used to know as
the RPI but now, Evan, is Ö Oh dear, it gets my brain - RPIX, RPI less
consumption of the prices, consumer price index, which is the one Ö
But he hasnít actually moved to that specifically for allowances. Heís
using that for some measures but not others.
DAVIS: Arithmetically the CPI calculates an average in a
different way to the RPI and comes up with lower numbers. Now I
think the Chancellor is aware of the fact if you started raising pensions
and tax allowances with a new form of calculation that gives you lower
numbers than the other form of calculation, people would cry foul; and,
as a result of that, I think he hasnít thought that was a battle worth
fighting - or at least not yet. But itís all to do with whether you use the
arithmetic mean and you add up the numbers and divide by the numbers
you started or the geometric mean where you multiply by the numbers
and take the nth route. Iím sure many of you listeners will understand
and know the difference.
DUGGLEBY: Is it reasonable to suppose, Roger, that sooner or
later he will want to move to one measure? Heís just kind of waiting
till the two kind of converge to a convenient point?
BOOTLE: Well I suppose that may well happen. I think
the important thing though is whether this change of measure has made
any substantive difference. I hear lots of people say isnít the inflation
rate fiddled, itís not really that low. And I donít believe thatís true
actually because the recent rate of increase for the CPI is 1.6 against a
target of 2. Now the recent increase of the old measure RPIX is I think
2.1 against an old target of 2.5. So, in other words, even if weíd stayed
on the old target, frankly, we would still be well below it.
DUGGLEBY: Okay. Hilary, perhaps you can take this one.
Itís an e-mail from somebodyís who concerned about the Private
Finance Initiative. ĎIsnít it just another name for increasing the national
debt? And this business of the private sector financing it, actually itís
really the public sector by another name?í Can you comment on that?
COOK: Well it is very interesting what the Government
chooses to put on its balance sheet or not on its balance sheet. British
Energyís debt is on the Governmentís balance sheet; Railtrackís wasnít.
And Private Finance Initiative is no different. Itís saying well look, we
donít think this is our risk. We will take it off. You know itís not our
risk and our responsibility, so weíll take it off our balance sheet and, as
long as it works, thatís well and good.
DUGGLEBY: I think I might have anticipated your question,
Christopher, in Canvey Island.
CHRISTOPHER: Yes. Iím just wondering how the Government
is going to be able to fund public services at an adequate level when so
much cash is being drained out of the public sector by these PVVís,
these private finance initiatives. We know they cost a lot more. The
first wave of PFI hospitals had to have a 30% reduction in beds simply
to pay for them.
DAVIS: I think you do have to remember, Christopher,
that if we hadnít done it on the PFI, we wouldnít have got it free Ė you
still would have had to pay for it. So my view of this is that the whole
argument is exaggerated; that the PFI doesnít allow you to get it for free,
as some proponents of it seem to imply, but equally doing it by the PFI
doesnít mean you would have got it free otherwise. And you know if
we were going to have those hospitals, we would have probably
borrowed extra money to build them and then we would have been
paying interest to the private sector over the next thirty years. In the
PFI, we donít call it interest. We call it service payments and we get
the cleaning and a bit of hospital maintenance thrown in with it and we
pay a little more. So in a way, I donít think it is that big a deal. In
addition, itís not that much. I mean weíre talking about relatively small
billions of pounds here each year and thatís not in the big picture quite
enough to sort of swing the difference between a bankrupt government
in thirty years and a viable government.
DUGGLEBY: That raises the question there, Evan. These
numbers that weíre talking about, at the end of the day Gordon Brown
will come up with something which you will analyse as being you know
plus or minus 3 billion and then against that we will no doubt see that,
no matter what he does, thereís a 10 billion black hole about to appear.
Can we enlighten the audience on the balance of the budget and the
possible black hole? Roger Ö
BOOTLE: Well I think youíre putting your finger on an
important issue here because I do think actually that what weíre
discussing is relatively trivial. The big questions are I think to do with
the position of government debt Ė is it properly accounted for? Now if
you take public sector pensions, for instance, I reckon that the liabilities
there could be up to about £700 billion or about 60% of GDP. Now
thatís pretty big potatoes. And that of course will not be discussed.
Now by contrast, 3 billion is frankly neither here nor there.
DUGGLEBY: Hilary Ö
COOK: Well certainly thereís a lot of scope for debate as
to how risky is Gordon Brown being in being confident about that he
doesnít need Ö You know he will say he doesnít need to raise taxes
for the moment, heíll say heís being very prudent. Is he going to get the
revenues he needs? And whether he gives away 3 billion or not is, as
we were hearing, relatively irrelevant. Itís what does the next economic
cycle look like and how are we going to look in 2009 when weíre
looking at the next election.
DUGGLEBY: Indeed. Just in a word of course, Evan, the
current economic cycle, this golden rule Ė that I think is about to end.
Can we put tests on the economy to see whether we genuinely have had
the performance that he promised?
DAVIS: Itís a matter of judgement. Gordon Brown aims
to balance his golden rule over the economic cycle. He defines the
economic cycle Ö
DUGGLEBY: Which is this year.
DAVIS: Ö which actually ends at the end of the next
year, so heís got one more year to run on this cycle. Thereís room for
argument on when the economic cycle starts and ends, but I think
Gordon Brown would have to pick something that economists think is
reasonably credible, which is you take a time when the economy looks
pretty normal, it bounces up and down a bit, you pick another year when
it looks pretty normal like itís neither overheating or in recession or
underheating, so to speak, and you say okay that period in between is an
economic cycle.
DUGGLEBY: Okay, John Ö
WHITING: Just one comment on 3 billion or whatever it is
that weíre bandying about. With the greatest respect to my economics
based colleagues, that to a simple taxman is actually quite a lot of
money. I mean you could of course abolish inheritance tax and still
have some change out of 3 billion.
DUGGLEBY: Weíve got several e-mails about that, yes.
WHITING: But then again 3 billion pays for just under a
penny on income tax. So you can make a difference to of course the
people who get it, and if he spends it all on increased childcare thereís a
few people whoíll notice the difference. But, as has rightly been said, 3
billion against total tax take of about 450 billion is not a lot.
DUGGLEBY: No.
DAVIS: Just to say, a billion pounds for people who find
these kinds of numbers difficult to comprehend works out at about,
about, very approximately, £1 a week for every household in the
country. So if he says itís a tax cut of a billion pounds next year, that
amounts to the equivalent of £1 a week per household in the country.
BOOTLE: I think actually the key thing about all this is
frankly the Chancellor shouldnít be deciding these issues. I mean if it
were not for the imminence of the election, do we really believe that
weíd be discussing the possibility of tax cuts? Surely we wouldnít be
doing that. Weíre only talking about tax cuts because thereís an
election. Now I think that these fiscal questions should be decided by
an independent fiscal committee or fiscal commission just like the MPC.
They should do the forecasting and they should say this is the time we
should raise taxes or we should cut them or whatever.
WHITING: So more privatisation of the Treasury then?
BOOTLE: If you like, yeah.
DUGGLEBY: Weíre going to move on to tax in more detail
now, shift the emphasis of the programme. And as you might expect, I
think the predominant number of calls weíve had Ė and e-mails Ė
concern, in no particular order, stamp duty and inheritance tax and Ö
yes and stamp duty and inheritance tax. Right Bruce, youíve got a call
on this subject.
BRUCE: I do. As the Chancellorís liable to bring up
stamp duty in the budget on Wednesday, is it possible to explain to me
why the system is such that it causes a forced market around the steps
when they would be a lot better having either a straight sliding scale or a
sliding scale of some sort to in fact mean that each Ö you know the
price goes up with regard to the price of the houses, not this massive
jump?
DUGGLEBY: Itís this question of when you hit a particular
threshold, the stamp duty Ö Yes, why canít you have a system which
doesnít have a Ö
BRUCE: Exactly Ė 249 to 251, you can pay 2% difference.
Itís ridiculous.
DUGGLEBY: I mean thatís not impossible John because weíve
had other taxes which have operated like that.
WHITING: Absolutely. If we look at the way personal tax
operates, you get your personal allowance and that youíre free and clear
with; then you get a bit at 10%, then at 22% and then at 40%.
DUGGLEBY: So why didnít they do it like that?
WHITING: Well I think thereís a strong element of they
didnít and thatís how it is because itís been built Ö And letís
remember this stamp duty, the 3% that kicks in at £250,000 plus, 4% at
half a million plus, is a relatively recent introduction by the current
Chancellor and Iím afraid thatís just the way itís been put in Ė brutally, I
think, to raise more money.
DUGGLEBY: Okay, Hilary Ö
COOK: But you have to also remember when he
introduced this scale, he said that he was doing it to take heat out of the
housing market and if you have a sliding scale it doesnít have the same
impact. And certainly we are seeing quite a lot of houses priced just
below that £250,000 level because thatís where the big kicker comes in.
WHITING: But of course for people who are paying it, it
seems so grossly unfair. You buy a house for £250,000, stamp duty
£2,500. £251,000, suddenly stamp duty is at seven and a half thousand.
We would have a fairer system if we did it on the sliding scale, but it
wouldnít raise as much money. It raises about 3Ĺ to 4 billion a year.
You can understand why heís quite wedded to it.
DUGGLEBY: Roger Bootle is obviously fairly well known for
his views on the housing market - I think youíre still predicting a fall -
but does taxation play any particular part in influencing the housing
market?
BOOTLE: Well it certainly hasnít worked so far, has it, if
Gordon Brown brought in stamp duty to restrain the housing market? I
have to say I think itís a pretty inefficient tool. Now as and when the
housing market really is flat on its back, and itís a passable imitation of
it now, I think that stamp duty then does start to be a serious problem
because it is grossly inefficient in the way it affects the market.
DUGGLEBY: Okay. Weíll take another issue now, which is
this Ö Oh no, before we do that, letís just have Ö quite a slightly
interesting question from Andrew in York, an e-mail. He says if he
wants to cool the housing market a bit, he thinks buy to let is the
problem and he says why doesnít he simply remove mortgage tax relief
from buy to let properties. How about that?
DAVIS: Partly the answer to that is I think itís just a
generally accepted principle of business taxation; that if youíre running a
business you can offset your costs before you pay tax, and buy to let is a
form of business and it would be to treat it very differently to other
forms of business if you didnít do it that way. So I think it is sort of the
natural treatment you would have for any kind of business investment.
DUGGLEBY: Alright. And then Ö
WHITING: I think Iíd go along with that. And thereís also
the point that of course when you sell your buy to let property, thereís
capital gains kicking in. Now you might argue that you know thereís
either one or the other.
BOOTLE: But if you borrowed to hold a portfolio of shares,
you wouldnít get interest relief, would you?
WHITING: I fully accept that.
DUGGLEBY: George has e-mailed us saying Ďmy son is just
about to sign on the purchase of his first house. Do you think he should
leave it till after the budget in case Gordon Brown raises the threshold on
that?í Hilary Ö
COOK: Thereís absolutely no harm in doing that,
exactly, because thereís unlikely to be bad news for him.
DUGGLEBY: I mean £100,000 is being bandied about as the
figure he might choose.
WHITING: Or £150,000, which is already there for a
disadvantaged area. Do check his sonís postcode that heís buying in as
to whether itís a disadvantaged area.
DUGGLEBY: Well we know Gordon Brownís own
constituency, I think, is one of the few places which has houses available
under £60,000. Another point made by Margaret in Weston Super Mare
is Ďwhy on earth, if he doesnít like the way the property marketís going,
has he allowed residential property to be put into pension funds from
next year?í Roger Ö
BOOTLE: Well Iíve got this terribly cynical view, Iím
afraid, that whenever a government gives a seeming concession on an
asset or investment, itís a clear sell signal and I think he was just really
sort of obeying this general rule. I mean it happened with pensions in
general, in equity markets, and I think heís just falling for the usual
thing.
DUGGGLEY: Okay, inheritance tax now and, Bruce, youíve
got a call about that in Bristol. Sorry, I beg your pardon. Cliff. Iím
sorry, Bruce weíve just had. Cliff in Bishopís Stortford, your call Ė Iím
sorry.
CLIFF: Yes, Iím just wondering how much the
inheritance tax take has increased over recent years, given that the
threshold hasnít been increased? There must be quite a nice windfall
tax for the Chancellor.
DUGGLEBY: Yes, itís certainly increased the tax take. John,
can you give us the figures?
WHITING: Yeah, itís currently taking about 2.8 billion. Itís
drifting up quite nicely. Itís gone up from 1Ĺ to 2 billion some 5 to 7
years ago Cliff, so it is going up nicely. It still only affects about 5% of
estates, although 3 years ago it was 4%. So again itís a signal that itís
just drifting up and of course house price inflation is building up ahead
of steam. Itís not really kicked in yet, but you can see that in a few
years time inheritance tax is going to go up you know noticeably. Itís
not going to outpace income tax, but itís a nice little earner.
DUGGLEBY: Is there a feeling that this is getting onto the
political radar though, this question of houses and inheritance tax?
Evan, do you think thatís what happens?
DAVIS: I think thatís exactly what happens. Essentially,
when you use stealth taxes they are stealthy at first because nobodyís
really noticing them and not paying attention to them because theyíre not
very high; and the higher they go, the more people begin to notice them
and theyíre not stealthy for very long. And the whole story of Gordon
Brownís period in office is in essence taxes that were relatively
uncontroversial becoming very controversial: petrol tax - weíve had the
protests in the last Parliament; cigarette tax Ė people have in a way
rebelled against it by simply not paying it and buying from guys down
the pub with sort of holdalls full of cigarettes bought overseas; council
tax Ė it just sort of chugged along, itís now become a very important
political issue. And I think youíre seeing too the pinch points, as the
Conservatives call them, with stamp duty and inheritance tax.
DUGGLEBY: John, what is your forecast for Mr Brownís list
of possible giveaways? I say possible because Mr Brown hasnít given a
great deal away. But, nonetheless, even within economic prudence, I
mean would inheritance tax come reasonably high on your scale of
perhaps allowing a bit of a higher threshold?
WHITING: Yes, Iím sure heíll raise the threshold, but
actually I donít think itís going to go up dramatically - from the current
263 threshold to 270 to 275,000 rather than doubling it to half a million
as some people would like to see. Personally, Iíd like to see him in a
sense mark time but commit to a thoroughgoing reform of the tax to say
well should we really have a tax on death? If so, what should it really
look like because it was designed in 1894 for a rather different situation
to that which we have today?
DUGGLEBY: And there is of course the argument, Hilary, that
why should houses be given special preference over any form of asset Ė I
mean shares or what have you?
COOK: Well and capital gains tax comes into the
equation here now and surely weíre not going to see capital gains on
property. But the capital gains tax is another tax that really does need
reform. Desperately expensive to commute and therefore to collect, so
very interesting to see if heís got anything to say there. But it raises
him money, so unlikely weíll get any help really.
DUGGLEBY: Heather, youíve got a point about capital gains
tax.
HEATHER: Well yes. I, like many people, have a family
house. Weíre selling it very shortly, we hope, to release capital.
Weíve always regarded our house as part of our pension fund. We
could have perhaps put the money elsewhere, which wouldnít have
attracted capital gains tax, and I think itís grossly unfair to even think
about putting capital gains tax on a pension fund.
DUGGLEBY: Iím not sure that the newspaper stories fully
reflect whatís going on. I think itís one of these sort of scare stories
thatís risen. I would be absolutely astounded if he brought in anything
like that. Nonetheless, Roger, this is the point. I mean youíve heard it
there, you hear it constantly Ė my house is my only investment thatís
really done me well over the years.
BOOTLE: Yes, I have a lot of sympathy for this, but the fact
is that housing is treated in a very anomalous way, a very preferential
way, and I donít think that does an awful lot of good for the economy.
But just to put the callerís mind at rest. I mean I think that although this
idea has been mooted from time to time, as you say the chances frankly
of it coming about now before an election, Iíd give you several hundred
to one.
WHITING: Or even well into the future.
BOOTLE: Even in the future.
WHITING: When you look at it, housing is taxed: youíve got
stamp duty, which weíve just been discussing, inheritance tax, youíve
got the capital gains tax on the second home, youíve no mortgage
interest relief any more. So letís get a bit of a balanced package here as,
increasingly, people are looking at their house and saying that is my
pension fund or at least part of it.
DUGGLEBY: Okay, weíre moving towards the end of the
programme. What I want to try and do in the last couple of minutes is
to get a feel for what Gordon Brown is going to try to Ö the message
heís going to try and get across in this budget. I mean we know the
words like Ďprudenceí and Ďgood housekeepingí and things like that.
But over the years heís tended to shift money for example towards
parents and children, heís tended (as one of our e-mailers has said) to
take away from single people, though Iím not sure thatís true. What
message do you think Gordon Brownís going to want to get across in
this budget, apart from the numbers, Evan?
DAVIS: I think this is a taking stock budget. Itís the pre-
election budget. Itís the one where he will try to remind everybody (in
case we were becoming complacent about it) that he is the man who has
turned the British economy into this rather utopian dream and heís going
to essentially make his pitch for Labour party supremacy on the basis of
this budget. Heíll make his pitch for the Labour party in the country on
the basis of this budget and it will remind us of how well he has done.
DUGGLEBY: Hilary Ö
COOK: I think heíll remind us how well he has done
against other countries and through a period when the rest of the worldís
had a pretty tough time and heíll justify his spending on that basis.
DUGGLEBY: John, from the tax point of view do you think
heíll try and sort of leave a sort of sweet taste in peopleís mouths?
WHITING: Oh I think thereíll be some little giveaways,
probably concentrated on childcare - increased help there, possibly also
for the elderly - both in turn are popular with the electorate. So at the
end of the day the vast majority of people will feel not particularly better
off or thankfully not particularly worse off either.
DUGGLEBY: But no rabbits out of hats or anything like that?
Heís not that sort of Chancellor, is he?
WHITING: Well thereís always one, like free TV licences
for the over-75s, but hopefully no gimmicks like that.
DUGGLEBY: Roger, whatís your feeling about Gordon
Brownís position? I mean we might well talk about his legacy. I mean
it could be his last budget, I mean even if he stays on as Chancellor
perhaps for a little bit.
BOOTLE: Yes, I suspect the old hardworking families will
be wheeled out again. Heíll want to give something away if itís a pre-
election budget, but only for that reason. But he canít afford very
much, so I think the accentís going to be on planning things which sound
very good and cost very little.
DUGGLEBY: Well my hope is that he actually slows down a
bit because he just spews these numbers out like a machine gun and itís
absolutely impossible to work out what heís saying. It might impress
the MPís, but Iím not sure that it impresses the listeners.
WHITING: Does he get faster as it gets more difficult with
the ones that he wants to brush over?
DUGGLEBY: Indeed, okay. Well thanks very much indeed. Weíve
got to call a halt to the discussion, but many thanks to Evan Davis,
Roger Bootle, Hilary Cook and John Whiting. Radio 4, as you might
imagine, will have extensive budget coverage and the speech will be
carried live in an extended edition of the World At One on Wednesday,
starting at 12.25. Then on Thursday Iíll be back with Paul Lewis and a
panel of tax experts to answer questions on what the budget means for
you. Thatís Money Box Budget Call starting at 12 noon on Thursday
morning on Radio 4. The usual weekly Money Box programme is on
Saturday at noon and Money Box
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